Reserves

Let's get to the point and follow the established guidelines.

In this nine minute video clip Council Member Laine asks about budget reserves for the FY25/26 budget and CFO Ed Van Eenoo responds. He and the budget staff presented the budget with a five year restoration of reserves to the Government Finance Officers Association level recommended for Austin, 16.67% (usually stated as 17% for convenience). The link to the transcript of the meeting follows in the third paragraph, but paraphrasing he states that the use of reserves this year is justified by the guidelines adopted by the council when he was doing what is now Director Lang’s job, citing flat sales tax revenue in our present economic milieu. An informational example given was the change in the level of reserves he recommended and council adopted immediately before the pandemic when the statutory property tax rate was decreased from 8% to 3.5% by state government. This recommendation emerged because of the volatility of sales tax revenue. As a result Austin was thus able to use reserves for basic city services during the COVID-19 pandemic and put the federal dollars provided shortly after it began into the community, one of the few cities able to do that. When the statutory property rate was 8% the city could intermittently raise property taxes when sales taxes were flat and not have to use reserves to maintain city services.

In response to CM Laine’s question about bond ratings Van Eenoo states that the companies who give ratings will not penalize Austin for using reserves this year when they are needed to stabilize the budget, nor will the city’s bond rating be lowered during the five year plan to restore the reserves that was presented by budget staff.

The entire video of the budget session from which the clip above was taken is shown as day one of my substack post titled The Three-Day Marvel. The closed caption transcript of that meeting is here with the video clip above starting on PDF p.76.

Now compare the five year restoration plan Director Lang and her staff presented last November for the FY25/26 budget with what they presented May 5th for the FY26/27 budget.

Under INCLUDED ITEMS: line 2 you will find the budget reserves restored to 17% in one year at a cost of $13.7M instead of the five years as presented last November. Using the numbers provided and changing the transfer of the $13.7M to reserves over five years, the amount transferred is $2.74M/year and $13.7M - $2.74M = $11M available for other purposes in the FY26/27 budget

Returning to the CFO’s response above and using percentages instead you will find below the percentage of the yearly budgets transferred to reserves over five years to reach the GFAO approved level.

FY25/26 reserves at 15.7% as per city manager’s budget after removal of $14.1M (See slide in video clip.)

FY26/27 15.94% transferred to reserves

FY27/28 16.18% transferred to reserves

FY28/29 16.43% transferred to reserves

FY29/30 reserves restored to 16.67%

Also as per Van Eenoo’s response to Council Member Laine this will occur without any effect on Austin’s bond rating, which is at the highest rating available for each of the rating systems as of September 2025 when Fitch Ratings joined the others and changed Austin’s rating from AA+ to its highest AAA rating. And why did Fitch make this increase?

Pension reform: Recent legislative changes to the firefighter pension plan have made the City’s long-term financial obligations more manageable. These changes allow the City to follow a more sustainable funding plan for the pension system.

That was due to work at the previous Texas legislative session and obtaining the approval of changes to the firefighters pension from the Texas Pension Review Board.

After the Fitch Ratings change I wrote Fitch Ratings declares a winner! intended to be mild humor in response to an episode which occurred at the August 13, 2025 budget adoption hearing. I assure you however that I will not be in the least amused if CM Ellis prioritizes her upcoming election effort for a third term for which she is gathering signatures from district 8 residents as per the city charter in order to be allowed to run. It is a “purple” district and as a council watcher I can tell you that sometimes she votes to cover her right flank. For example her earlier vote against raises for council members knowing that it would pass without her assent.

At that same August 13, 2025 Budget Adoption Hearing CM Laine echoed the selfsame misinformation about budget reserves. She is in her first term as a council member and is all too well aware that no one elected from district 6 has yet won an election for a second term. Another “purple” district and even more volatile than district 8.

Beyond the boundaries of districts 6 and 8 however I recommend that the mayor and all council members heed CFO Van Eenoo’s response to CM Laine last November 18th. My point being that any council member or the mayor who votes against the established guidelines for reserves as voiced by Van Eenoo above is making a political decision of some sort for some reason, and not a factual one in the best interests of the Austin community.